Sunday, November 05, 2006

Solution Focused Trading

What is the one thing we see among successful traders, artists, athletes, executives, researchers, and companies?

They build upon their strengths and don't become bogged down trying to invent new ones or attempting to improve their weaknesses. In so doing, they become learning machines.

Consider a simple example. When I first began this blog not quite a year ago, I averaged about 7500 visits per month. This continued for the first few months.

I then began to study the daily statistics of how many people were accessing the site, which pages they went to, and where they were referred from. What I found was that certain topics interested readers and other bloggers quite a bit. Other topics fell flat and generated little interest.

Did I spend time trying to make the unpopular topics more palatable or trying to convince other bloggers to link to my less desired work? No, I took what brief therapists call a solution focus instead. The readership was telling me what their needs and interests were. I needed to do more of what was already working, not fiddle with topics that weren't relevant for readers.

With a shift in emphasis toward highly practical research findings and psychology themes, I found that readership had tripled by May. Feedback from reader comments and emails led me to build further on strengths, adding the morning market updates to help readers apply information from the blog in real time. With that, readership has undergone a doubling from May levels.

By gathering information every day on how the blog was performing and using the data to identify and build upon strengths, I've been able to make the site more useful for readers. Every post, popular and unpopular, became a learning experience. The trajectory of growth in readership, which had been flat prior to my studying the statistics, took a significant upward turn.

This is the process by which all elite levels of success are achieved: identify core competencies and build upon them, constantly assessing what is working and what is not. Figure out what you're doing right--and then become very intentional in doing it more often, more consistently. Don't invest your limited time and effort in areas that don't represent what you do best.

This is why it is vital to study your best trades, not just write in a journal about your worst ones. Find the trades where you had an excellent plan or read of the market and where you were able to execute the idea well. What patterns did you pick up on? How did you act upon the pattern? Were the patterns more apt to appear in certain stocks or at particular times of day? Such questions will lead you to what works best for you.

You may find that just one or two patterns in one or two markets at one or two time frames account for a large part of your success. Don't try to tweak what isn't working: figure out ways to capitalize on your core success in related markets, with steadily increased size. Build upon what you do well; don't try to remake yourself based on preconceived notions.

The solution focus is evolution in real time. We are selecting the strongest of our behavior patterns and allowing the weakest to become extinct. Over time, our own guided natural selection enables us to become learning machines, capable of superior adaptation.

Think about how a solution focus could guide your trading development, your career development, and your relationships. Think of yourself as an engine of continuous evolution. How far we could go if we provided every facet of life with an emotional P/L statement and just focused on doing more of what makes us happy, fulfilled, and successful!